The regulatory intervention report covers key stages in the case including how TPR assessed the application from TSUK for a Regulated Apportionment Arrangement (RAA), and separately its proposal for a new pension scheme.
In early 2016, Tata Steel Limited decided that it was no longer prepared to continue funding TSUK, or consider funding a turnaround plan, without a restructuring of the BSPS.
The report highlights how the restructure represented a significantly better outcome for the BSPS than would be achieved under the insolvency of the sponsoring employer, the only other remaining alternative.
TPR insisted that cash be provided upfront to the BSPS by the Tata Steel Group, which eventually offered a payment of £550 million, along with a 33% equity stake in TSUK.
The report again demonstrates that TPR will only agree to an RAA if stringent criteria have been met to prevent the process from being abused.
Nicola Parish, Executive Director for Frontline Regulation at TPR, said: “This was a highly complex case affecting thousands of pension savers. Our report highlights how we took a number of decisions to deliver the best available outcome for scheme members in difficult circumstances.
“The use of an RAA has a significant impact on scheme members - it means they will not receive the pensions they have been promised. This is why employers who are considering applying to us for one need to satisfy themselves, along with their scheme’s trustee, that insolvency is the only alternative and such an arrangement will provide a materially better outcome than the scheme would achieve in insolvency. It is also why we always consider whether we could achieve a better outcome through the use of our powers.”
The 125,000 members of the BSPS recently had to decide on whether to stay in the existing scheme, which will go into the Pension Protection Fund, or join a proposed new scheme. Today’s report outlines how TPR considered the proposal for a successor scheme.
The provision of a so-called ‘successor scheme’ is not a requirement for TPR approving RAA applications and it is rare for members to be given this option whilst an application is being considered. As the proposal was made at the same time as the RAA application, TPR considered both at the same time. However, the proposed new pension scheme was not a determining factor in TPR approving the RAA.
Establishment of a new pension scheme is not a foregone conclusion. Qualifying criteria still need to be met and a decision is due to be announced in March. The report shows that having completed its analysis, TPR concluded that, if qualifying criteria are met, funding risks under the new scheme’s benefit structure are manageable.
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